2. Confidence to do business
3. Jargon-busting
4. No payment? No problem
6. Stat track
8. Anywhereâ&#x20AC;&#x2122;s possible
10. All shapes and sizes

Credit
means credit
In association with:

Coface Cover.indd 3

29/03/2019 17:14

Welcome

The confidence

to do business
BY Andrew Share, commercial director, Coface UK

If business confidence was a
balloon, it’d be visibly deflating
amid the current atmosphere of
economic uncertainty

F

rom the chaos surrounding Brexit to stagnating
global growth, it’s no surprise businesses are feeling
pessimistic. According to the Office for National
Statistics’ latest figures, business investment fell by 1.1% in
the third quarter of 2018 – the third consecutive quarter-onquarter decline. Other signs that show companies’ appetite
for risk is shrinking include refusals to offer credit terms to
customers in high-risk sectors from fear of bad debt and
reluctance to commit to resource-intensive projects. Yet, those
that hunker down until the economic weather has settled could
find themselves looking back on this period with frustration.
While we all know growing a business involves an element
of risk, we sometimes forget a safety at all costs mentality can
be just as damaging. However, there’s a way for businesses to
both protect themselves from the risk of a financial shock and
have the confidence to grow.
Credit insurance is often wrongly associated with being
risk-averse but this is a misconception Coface is working
hard to overturn. As a global leader in the field, our role is
to facilitate trade and growth for our 50,000 clients. This is
partly possible because our policy holders are protected
from the impact of a customer’s insolvency or protracted
default, which provides peace of mind and the reassurance
needed to use sales revenue to pre-order stock and trade on
credit terms.
Coface also helps clients focus their time and effort on
financially healthy customers, given it only takes a few
moments to check our database of 80 million companies and
learn whether a prospective customer is creditworthy.
This supplement will shed further light on how credit
insurance works and makes all the difference for dynamic and
ambitious businesses, including those in volatile sectors. We
hope you find it an interesting read but more importantly, we
hope it inspires you to use credit insurance as part of your
growth strategy.

02

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break down

Jargon-busting
There’s some financial jargon confusing enough to make even the
most savvy business leaders clam up. But not understanding it can be
crippling, so read it here in plain English

C

redit insurance, delayed payments, protracted
default – not exactly the kind of lingo you hear at
parties. But the tongue-twisting syllables actually
mask some really simple and important concepts every
business owner must be at least be aware of.
Bad debt
Whether it’s due to bankruptcy or inexplicably going
silent, when a customer doesn’t pay for what you sold
them, or isn’t likely to do so, it’s known as a bad debt. In
other words, their credit becomes worthless as you can’t
foreseeably collect it. For SMEs, bad debts can prove
particularly challenging.
Late and delayed payments
In the eyes of the law, late payments are when money
for goods or services takes more than 60 days to arrive
after the customer receives their invoice or the goods
and services are delivered and the mutually agreed

payment date between the seller and the buyer passes.
The problem here lies in the fact businesses need
regular income to cover monthly overheads, wages and
other expenses, especially if they’re relying on just a few
sales coming in. And although you’re permitted to charge
late-paying customers 8% interest, a delayed payment of
up to 60 days is enough to seriously harm, if not destroy,
small companies.
Credit insurance
This means money owed to you or your business gets
received one way or another. This can mean providers
putting pressure on late-payers on your behalf, sending a
crack legal team to sort out non-payers or identifying a debt
which can’t be collected. It can be a lifesaver for companies
hoping to grow fast yet struggling to keep tabs on an everincreasing list of clients, as well as exporters who can trade
without fear of being duped by companies operating under
different rules overseas.
CREDIT MEANS CREDIT | COFACE

Demystifying.indd 1

03

29/03/2019 17:07

PAYMENT WOES

No payment?

No problem

04

Delayed.indd 1

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29/03/2019 17:07

PAYMENT WOES

With seven in ten small businesses battling legal
disputes over late payments, a solution like credit
insurance was nothing short of vital for these companies

I

f you’re a
business owner
you needn’t be
told late, delayed and
non-payments are big
issues for SMEs. In fact,
chancellor Philip Hammond
labelled late payments “the
continuing scourge” in his
2018 spring statement – a
trend he sought to “eliminate” –
and reinforced the government’s
commitment to fight them this year.
However, thanks to credit insurance,
these businesses aren’t worried:
Syed Nauman, credit manager
EMEA, Theory
In this trade, wholesale fashion
[retailers] are buying [our] jumpers for
winter in the middle of summer, right?
But what happens if you have a really
mild winter like we’ve experienced
previously? You can’t sell them to your
customers because they’re all going
to the beach or are in light jackets or
t-shirts, because it’s too warm. These
factors all play into late payments.
I don’t think customers intentionally
plan on not paying, we have to have
some element of good faith. But we also
have to understand the fashion and
wholesale market when we’re supplying
high-end independent stores. They’re
subject to these variations, so we’ve got
to find a happy medium.
We’ve had several cases but through
Coface and our own team here we
tend to reach out to customers. Only
when the relationship’s totally broken
down do we allow Coface to take
over completely. Thankfully it hasn’t
happened that frequently but when it
has it’s paid off really well to be honest
because the pressure’s not only coming
from us, it’s coming from Coface.
The client tends to pay up or agree to

revised terms with us where there have
been late payments.
Zoe Webster, accounts administrator,
Elefant Gratings
We obtained cover after experiencing
a few cases of non-payment. Most of
our customers adhere to our payment
terms but if this doesn’t happen, credit
insurance helps to alleviate the stress
as it means we can still meet our
obligations to pay factories, suppliers
and distributors on time. The onscreen rating gives a great indication
of company risk and the system also
enables us to view progress on the
overdue invoices that [our provider] is
chasing on our behalf.
Sergio Vignone, credit manager,
Duferco International Trading Holding
In 2014, we made our biggest claim for
£500,000. Everything went smoothly
and we received payment 30 days after
declaring the loss. That sort of sum will
destroy a year’s profit and it shows why
we won’t trade without cover – the risk
is just too much, even for customers
that we have known for the longest
time. We used [credit insurance] twice
in the last year in the UK to recover late
payments and [it] was brilliant. In one
case, we received the money just two
or three days before the company filed
for bankruptcy.
As traders, we obtain working capital
from our bank and then we receive our
money when the customer pays. The
banks themselves make credit insurance
a condition for access to trade finance
but we do not want to open our own
pockets if it all does go wrong.
John Hounsell, finance director,
TCS Media
As a media planning agency, we are the
principal contact and we are liable for

the cost, whether or not the client pays
us. When you consider that a campaign
might cost £1m and our return is
typically a small agency commission, we
obviously need protection in the event of
a client’s default.
It has been a while since we had to
make a claim – the last one was for
£250,000 about ten years ago. However,
one of the major reasons we have stuck
with [credit insurance] all this time is
they always paid promptly after liability
has been accepted, even with such big
claims. That is obviously very important
for our cashflow.
Credit limits are not always a top
priority for staff when they go out to
win clients. If a credit limit is refused,
we always insist on pre-payment
so we aren’t left holding the baby.
Sometimes the client goes elsewhere
and there may be other agencies that
are prepared to take on the business.
However, we know some small
agencies have gone under owing a lot
of money and we don’t want to take
that chance.
Rob Bowrey, chairman, Stanley Gibson
Our payment terms are between 30
and 50 days and we generally report
late payments after 80 days or when
we know there is a problem. For
example, we had a regular customer
who usually settled their bill at 40
days. After 50 days had passed, we
reported the debt because we wanted
the customer to know we were taking
the matter seriously. Sure enough,
[our provider’s] collections team was
able to apply the necessary pressure
and collect the payment for us.
It’s simple: we won’t offer credit
terms to a customer unless we can
obtain insurance cover for them. If
they aren’t insurable, they have to pay
for the goods upfront or it’s no deal.
CREDIT MEANS CREDIT | COFACE

Stat track
£9,000
is the average cost for each
business to recover overdue funds

27.2%
of invoices from small businesses
are paid late in the UK

£6.7bn
is the collective cost small
businesses face to chase up
money they’re owed

19,894

39 days
is the average time payments
take to arrive, with 33% arriving
between 31 and 60 days and only
51.7% within 30 days

is the number of corporate
insolvencies taking place
across 2019

£92m

was paid from credit insurers to UK companies in 2018’s
second quarter – the highest ever sum and equal to £1m a day
06

COFACE | CREDIT MEANS CREDIT

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29/03/2019 17:08

One unpaid bill – that’s all
it takes to kill a business
One of the largest single dangers to your
business is non-payment. An interruption
in your cash flow means you can’t pay
your bills, which could have a serious
knock-on effect on one of your
customers, potentially disrupting the
whole supply chain. One domino
falls and the whole row collapses.

So how can you protect
your business?

Amid current economic uncertainty, it
makes sense to protect your company
from sudden financial shocks. By working
with the right business partner, you can
secure the future of your business, stay
informed and ensure you’re ready to take
advantage of new opportunities.

To find out how Coface can support your business, call
0800 085 6848 or visit cofaceitfirst.com
Coface is authorised in France by the Autorité de Contrôle Prudentiel et de Résolution. In the UK Coface is subject to limited
regulation by the Financial Conduct Authority and in Ireland Coface is regulated by the Central Bank of Ireland.

Ad1.indd 1

29/03/2019 17:13

hawkins & brimble

Anywhereâ&#x20AC;&#x2122;s
possible
With peace of mind from its credit insurance,
Hawkins & Brimble has skyrocketed since
its birth three years ago and gained the
confidence to export to 15 nations

08

COFACE | CREDIT MEANS CREDIT

Client Profile.indd 1

29/03/2019 17:08

hawkins & brimble

H

awkins & Brimble, the
men’s grooming brand, is kind
of a big deal. Not only has it
already sold over 350,000 products
since its launch in December 2016,
totalling something above £1.3m in
revenue, but it’s spread its wings to
15 countries across the world. “We’re
what they call a mature startup,”
describes Stephen Shortt, founder
and CEO. Given this has all happened
in just over two years, it should be
obvious by now Hawkins & Brimble is
gunning to soon be the leading global
name for natural male grooming.
“We’re projecting £2.8m sales in year
three with over 3,000 stores globally
already,” Shortt adds. However, he
admits this wouldn’t be possible
without one crucial ingredient.
Before launching his startup Shortt
spent a decade at Intamarque, the
marketing agency, as commercial
director. As part of his role, using credit
insurance was a no-brainer. “Credit
insurance is security obviously,” Shortt
says. “It gives us confidence to be
able to trade with our distributors and
customers globally without worrying
about debt.” Indeed, when there’s
an increasing number of clients to
handle it’s a given at least one will
play up with late payments, nonpayments and the likes. In fact, 43%
of SMEs experienced late payments
across 2018 according to BACS, the
automated payment provider. If one of
them happens to be for a particularly
big sale, you’re in trouble. “When

your invoices and business gets to a
certain size then you’re at more risk
obviously,” Shortt continues.
So when the time came to part
ways with Intamarque and launch his
male grooming startup, there was
one thing Shortt had to get straight
from the get-go to ensure there were
no boundaries to growth. “I used to
use Coface in my last business so I
[knew] to do it again,” he says. After
hitting up his old contact and one web
enquiry later, Hawkins & Brimble was
equipped to go anywhere it wanted.
“Obviously there’s some contract stuff
to do but at the end of the day I think
it’s pretty straightforward, quite easy,”
he remembers of the process, which
also involved putting the details of
ideal customers into his provider’s
online system.
Before even encountering things
like late payments for Coface to
come in and deal with, Hawkins &
Brimble felt the benefits of credit
insurance immediately. Armed with the
confidence its provider is available if
things go South with overseas clients,
it’s no wonder the startup’s grown so
much so quickly. “We look at more
markets further afield if Coface cover
them,” Shortt says. “We’re already
exporting to different countries.”
This isn’t to mention credit insurance
effectively serving as a free credit
check as another layer of certainty.
“If you get the insurance it serves the
same purpose,” Shortt explains.
With the seemingly endless closures

of high street stores from Debenhams
to House of Fraser, these are securities
Shortt wouldn’t dream of passing
up in this day and age. “It’s unlikely
that some [clients] will go bust but
you just don’t know with some big
retailers nowadays,” he contemplates.
Fortunately, he can consider himself
not one of them, which is a blessing
given his sector’s at a medium credit
risk according to research by Coface.
“We luckily haven’t been caught,”
Shortt says.
While credit insurance used to be
viewed as a luxury for big names that
can afford it, rather than an essential
for those starting out, times and prices
have certainly changed. “I don’t think
in this day and age you [can] do that,”
he advises to those ignoring credit
insurance. “My advice would be to get
a quote because it’ll be possibly lower
than [you] have imagined.” Indeed,
compared to potential losses from lack
of safeguarding in today’s ambiguous
times, purchasing credit insurance
may soon become the standard for
businesses of all shapes and sizes. “If
you’re running a successful business
and you get a bad debt, that really
can take you back months if
not years in terms of loss of
profitability,” Shortt concludes.
“From my perspective, for the
cost of doing credit insurance
we could lose £100,000
or more if one of our
customers goes bust. So
it’s a no-brainer really.”
CREDIT MEANS CREDIT | COFACE

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09

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any sector

All
shapes

and sizes

Not all industries are created
equal but they’re given the
same opportunities – and credit
insurance is one that should never
be passed up to let competitors
take the lead

D

espite credit insurance sounding like
a phrase restricted to the grey confines of an
accountant’s filing cabinet, this couldn’t be further
from the truth. From fashion to farming, here are just a few of
the industries you can be sure to find it in.
Reap what you sow
Agriculture quite literally involves planting seeds for future
success rather than reaping results immediately. As such,
buckets of patience are required for anything to do with
this industry. “Agriculture is very different from retail or
distribution businesses because the farm cycle is spread
over one year and the credit terms are three to six months,
rather than the conventional 30 days,” explains John
O’Connell, group treasurer of Origin Enterprises, the agriservices group. However, even having the patience of a saint
won’t guarantee customers will cough up. If nothing arrives
after three to six months of waiting, a resolution is needed
fast and Origin Enterprises didn’t want to wait until that day.
“As a PLC, we want to protect ourselves from sudden shocks
to the system,” O’Connell says.
Getting a top-notch insurance provider was therefore
vital. “If insurance isn’t there for a rainy day then its value

10

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any sector

is debatable,” O’Connell says. “Whenever we have
had to make a claim under the policy, Coface has
acted honourably and the process has been managed
smoothly and expeditiously.” He remembers one
occasion where his provider negotiated a debtor’s
outstanding payment down to a virtually immaterial
level. “[They have] a very good ear for the agriculture
market in the UK and Ireland,” O’Connell explains.
Moreover, with around 8,000 clients with their own
wants and needs, there’s a lot to keep an eye on and
cater for. “We provide agronomy services to more than
8,000 customers and it is not realistic to apply for a
dedicated limit for each of them,” O’Connell says. With
insurance, Origin Enterprises is able to axe a lot of this
unnecessary bureaucracy with a spectrum of flexible
options. “With Coface, we apply for credit limits on new
customers but after a year, we can apply a formulated
limit and make claims, provided we have evidence of
their trading history,” O’Connell adds.
Having used credit insurance for over a decade now,
it’s clearly a keeper for Origin Enterprises.
Build a foundation
Construction contractors typically deal with multiple
companies to get their materials, so beefing up their
client book as much as possible is the only way to
thrive as a supplier. It’s something Procon Readymix,
the concrete supplier, was well aware of. But although
necessary, frequently taking on new, unknown business
can invite issues. “We therefore needed to work with
new clients outside our usual territory but we wanted a
way to alleviate the risk,” explains John Power, director
of Procon Readymix. During a conversation with a
client, one route stood out. “We asked a contractor we
worked closely with for their advice and it turned out
they were using credit insurance,” Power says.
As with any new purchase, getting credit insurance
wasn’t without apprehension over cost. But Power’s
worries were quickly put at ease. “We were under the

impression that credit insurance would be expensive but
it was pennies compared to the value of the goods we
supply,” he recalls. There was even more ease when
credit insurance started fixing current problems instead
of just future ones. “It was quite an eye-opener to ﬁnd
that a client’s name was out of date or their business
was part of a group,” Power says.
With speed and flexibility in its arsenal, Procon
Readymix is now always ready to bring its A-game to
many contractors.
Strut your stuff
When instating the next big fashion trend you need as
many eyeballs as possible getting hooked. For Theory,
the wholesale clothing brand, supplying heavy hitters
like Selfridges, Harrods and Net-a-Porter isn’t enough
alone. “Independents are crucial, right?” reasons
Syed Nauman, credit manager EMEA at Theory. This
also requires getting products outside the comfort of
Theory’s US headquarters. “[We] basically market to
places like Italy [and] France just to widen our footprint,”
Nauman adds.
Of course, gunning for such exposure isn’t without
risk. “If you’re dealing with people across the continent
or globally, you need [credit] insurance,” Nauman
says. “Especially in this current climate.” In fact, simply
aiming to increase sales was enough to get Theory
signing up to credit insurance once Nauman arrived at
the company. “For companies that are looking to grow
through volume sales, insurance is imperative,” he says.
Ever since, Theory’s had the confidence to spread
the business like wildfire. “We’ve got I think about
300 free-standing stores worldwide,” Nauman says.
For this industry, the presence and exposure credit
insurance allows is a godsend to say the least. “With
insurance now we can offer [customers] Net 30 or
Net 60 terms, which allow us to onboard more clients
which allows us to get more stock out, which gives us
more visibility,” he concludes.
CREDIT MEANS CREDIT | COFACE

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Make sure you
don’t take an
unexpected fall
You grant payment terms to your
customers every day – it’s a routine
way of doing business. But do you
think of the risk you are taking?
At Coface we know that the more
volatile the business environment
the more volatile a company’s
payment behaviour can be. If you
want to discuss how you can
reduce your exposure to nonpayment or insolvency then
talk to Coface today.

To find out how Coface can support your business
call 0800 085 6848 or visit cofacetifirst.com
Coface is authorised in France by the Autorité de Contrôle Prudentiel et de Résolution. In the UK Coface is subject to limited
regulation by the Financial Conduct Authority and in Ireland Coface is regulated by the Central Bank of Ireland.